Pipeline politics and Chechnya

ByIan Bremmer and Tom CorcoranJanuary 24, 2000

International outrage over Russia's Chechnya strategy once again draws attention to how energy markets affect the course of current events. In short, Russia's ability to prosecute the war in Chechnya is abetted by the current high price of oil.

The rise in oil prices has given the Russian economy a boost, building acting President Vladimir Putin's popularity and providing the Kremlin with funds to pay the last installment of debt to the International Monetary Fund.

This has led many to recommend that the US draw down its oil reserves to depress the market. When the price of oil drops, the reasoning goes, the Kremlin's campaign in Chechnya will be severely impaired.

Whatever you think of the Chechnya crisis, this suggestion illuminates a paradox in the keystone of US policy on Eurasia - the Baku-Ceyhan pipeline, a project of multinational oil companies aggressively lobbied for by the American government.

Stretching from Kazakhstan through Azerbaijan, Georgia, and Turkey, Baku-Ceyhan is the only policy initiative for the region with wide bipartisan support in Washington.

The basic idea is to strengthen the nascent states of the Caspian region by weakening Russia's hold over them. All but one pipeline originating in the Caspian presently travels through Russia. Accordingly, Russia benefits from the transit fees on oil and gas passing through its territory. Russia also benefits politically - by owning most of the routes to market it effectively has a stranglehold on the Caspian economies.

Therefore, Baku-Ceyhan subverts Russian influence in an effort to strengthen the independence of the new states of the so-called southern tier.

Baku-Ceyhan is also self-defeating - its success depends on conditions that undermine its ends.

The pipeline is extremely expensive; the estimated cost of construction is roughly $3 billion over the course of the next four to eight years. Thus the commercial viability of the project depends on high oil prices sustained over a prolonged period, because oil companies are not interested in making the capital investments required without margins sufficiently wide to justify the expense.

But high oil prices provide the Kremlin with the resources to be mischievous in Chechnya, exporting its power and ignoring international pressures.

Indeed, it provides the Kremlin with the resources to consider other forms of adventurism all along its southern border.

The conditions necessary for the construction of Baku-Ceyhan subvert the very goals its backers seek to achieve. Nor does Baku-Ceyhan advance US policy goals. The Clinton administration ostensibly supports continued engagement with Russia, working to bring Moscow closer to the Western orbit. But by supporting the construction of Baku-Ceyhan, the administration sends the message that it wants to weaken Russia's influence, hardly the best way to solicit Russian cooperation. Indeed, by sending a hostile message to Russia, the administration's policy provides the Kremlin with persuasive reasons to obstruct US initiatives in the region whenever it can - that is, whenever the price of oil rises.

With Boris Yeltsin gone, Russian foreign policy will become less quixotic.

Mr. Putin is a pragmatic statist, likely to attack attempts to undermine Russia's influence in its backyard. With the resounding success of pro-Kremlin forces in recent parliamentary elections, Putin probably believes he would enjoy the public's mandate to do so. So now is the ideal time to remold US foreign policy with an eye toward practical ways to meet policy goals.

Baku-Ceyhan is self-defeating, serves no one's interests in the end, and will continue to undermine the stability of the Caspian.

*Ian Bremmer is president of the New York-based consulting firm Eurasia Group, and a senior fellow at the World Policy Institute in New York. Tom Corcoran is executive director of the Eurasia Group and a member of the Council on Foreign Relations Russian Economic Task Force.